Insights April 2020

Overview

• Reduced food service demand locally and globally will weigh on the medium term outlook for red meat.
• Uncertainty about domestic market operations, and ongoing export demand are weighing on local sheep and cattle
  values.
• Domestic factors, including seasonal conditions, should be mitigating factors, once concern about market
  operations ease.
• African Swine Fever continues to drive a gap in global protein supply and should provide ongoing support for
  Australian red meat exports.

Key Markets

China

• China was home to 25 per cent of Australia’s beef exports, and 36 per cent of sheep meat exports in 2019.
• Australian red meat exports to China are expected to decline in response to weak demand in the foodservice
  sector, which accounts for more than half of Australian red meat exports to China.
• China’s demand remains dependent on imported proteins to fill the gap created in local supply by the ongoing
  spread of African Swine Fever. This is expected to be more pronounced later in the year when the food service
  sector recovers.

Japan

• 22 per cent of Australia’s beef was exported to Japan in 2019, and food service accounts for an estimated 70%
  of Australian beef exports to Japan.
• The decline in food service activity could temporarily weaken demand for beef imports from Australia. The extent
  of the impact on Australia’s beef industry will be dependent upon how quickly Japan can recover.

South Korea

• South Korea accounted for 13 per cent of Australia’s beef exports in 2019. This trade is expected to be
  relatively unaffected by Coronavirus.
• A slowdown in food service in South Korea may temporarily weaken demand for beef imports from Australia,
  however overall South Korea is widely accepted as having managed the local outbreak of Coronavirus better
  than many countries, this should limit the impact within the South Korean economy.

United States

• The United States represented 20 per cent of Australia’s beef exports, and 15 per cent of sheep meat exports in
  2019.
• A localised spike in retail demand for ground beef in local US markets has added some support to imported lean
  beef prices, but this is expected to be short-lived as buying returns closer to normal within a month.
• A large proportion of Australian beef exports to the US are frozen beef used for burgers in food service
  channels. Reduced demand in food service in the US will temporarily weaken demand for beef imports.
• Lamb exports to the US are highly susceptible to reduced demand in food service as this channel accounts for
  60% of imports from Australia. There is generally low familiarity with cooking lamb at home.
• Lower foodservice demand for beef could see the US divert some product to Japan and South Korea, adding
  extra competition to Australian exports.

Middle East

• The Middle East accounted for 19 per cent of Australian sheep meat exports in 2019.
• Chilled lamb carcases accounted for 46 per cent of sheep meat exports to the Middle East in 2019. These
  carcasses are typically transported via air freight, taking advantage of the expansion of air-traffic through this
  region in the last decade. The grounding of passenger flights in recent weeks has significantly reduced viable air
  freight availability to service this market.

Source: Meat and livestock Australia
*cattle saleyard indicators replaced with MLA Cattle Market Price Indicators (CV19) from 25/3/20